International Finance: Distressed traders see bright spots in riskiest emerging market debt

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Distressed investors are finding ample opportunity in the riskiest emerging debt markets, which have few major bonds maturing in the year ahead.

Only a tiny portion of distressed sovereign bonds from non-defaulted emerging markets are scheduled to mature next year, according to data compiled by Bloomberg. That gives money managers the chance to cash in on the high-yielding notes, with relatively few looming 2023 principal payments to worry about.

While coupon payments can also ramp up default risk for a country in crisis, the calendar is thin for larger principal obligations. All together, there’s only about $1.3-billion in principal of the high-risk debt due next year – a small part of the roughly $118-billion in total sovereign bonds from non-defaulted emerging markets that yield an average of at least 10 percentage points more than US Treasuries, according to data compiled by Bloomberg.

Such depressed bond prices can carry potential for investors who expect governments to manage their debt loads – or at least come up with attractive restructuring conditions.

 

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